Tom

I'm sure this has been asked a lot in the past and so thank you for your patience. And I realize SECURE 2.0 may have changed this possibly. Have a client who hasn't deposited for 4 months in 2022. Dentist bought a practice and didn't know they or their new payroll company needed to initiate payment. The amount for the 4 months is probably less than $5,000. It's being deposited now and I know to report on the 5500 and file Form 5330. My question is the earnings calculation. This will be self-corrected. Can I use the DOL earnings calculator? It is easy to use and takes out any ambiguity. I read different things about whether can be used or not. I'm pretty sure the DOL earnings will be higher than the plan actual earnings for this period (which could even be a loss.) Thank you.

Prior to SECURE 2.0 there was the 3-year credit of 50% of plan admin costs up to $5,000 for small employers. I understand now that credit rate is 100%. PLUS there is now a new credit of 100% or an employer contribution up to $1000 per employee (phased down after year 2.) So a small employer starting a new plan gets both credits? That seems to be what I am reading. Is it really that good?

When payments are made through EFTPS you must indicate the form (945) and the tax year (you would indicate 2021) even though paid in 2022.) The IRS matches the 945 with payments in their EFTPS system. The IRS would apply the early 2022 deposit to the 2021 945 assuming the electronic payment was marked 2021 in EFTPS. Yes there is a penalty for late deposit. But deposit deadline varies - most of our plans are the 15th of the following month but some have a semi-weekly (not bi-weekly) deadline.

That happens. When paid in EFTPS, the payment is to be marked for tax year 2021, even though paid in 2022. That's fine as long as it meets that particular entity's deposit deadline.

Client had a DB plan and terminated it and rolled his balance to his 401(k) plan. This was not a merger and transfer. It was a termination and he electively rolled to his 401(k) plan, waived annuity, spouse waived annuity. We are showing it in the 401(k) records as an unrelated rollover. Now he wants to do a big in-service distribution to a Roth IRA. He is 57. the plan document allows for in-service distribution of rollover source funds at any time. I asked the former actuary who says the DB rollover lost its nature as pension when electively rolled into the K plan and so in-service is allowable. Part of the rollover source is SEP as well. And so the same question applies to in-service from a rollover source that resulted from a former SEP. Summary - can a 57 year-old can he take as in-service part of his 401(k) rollover account which resulted from a terminated DB plan? Thank you! Tom

Thanks Lou. I questioned because the effect is generally to favor HCEs - they can easily defer $20,500 in last qtr of the year and get 4% match on pay for the full year. A NHCE could defer 20% in last qtr (5% avg for the year) and get 4% match on pay for the full year. That would be unusual for an NHCE to defer a high% in last quarter but it is possible.

We have a client who opened a new plan in August 2022. The plan effective date is 1/1/2022. Deferrals did not begin until Oct 1, 2022. It is a basic safe harbor match plan allocated on a plan year basis. The match will be calculated after the end of the year. My question is must the match be based on compensation only from Oct 1 through Dec 31 or the entire year? Example: Employee has $10,000 in wages each of 4 quarters. Oct - Dec defers $2,000. Would this person get a $400 Match (4% just on 4th qtr wages), or a $1600 match (4% on full year wages)? Nothing in the plan limits the compensation or match period. Appreciate your comments.

Brokers will code the account - qualified plan so no tax reporting. But issue could arise if someone takes a distribution and has withholding. I realize employer can report under employer EIN and mark for 945 but the employer likely has a fast deposit requirement. I've seen by the time the broker sends the withholding, it gets deposited and someone does EFAST, time goes by. And a late deposit of withholding gets costly fast. We apply online to get a plan EIN and use it for tax withholding reporting purposes.

95% of our our plan clients use record keeping platforms fortunately. But there are those with brokerage accounts. We normally charge $125 for a distribution (we provide election form and tax notice, letter to plan sponsor to request the funds from the custodian, we write the distribution checks or issue ACH, withhold taxes and pay through EFTPS and do the 1099-R. We charge more for EFTPS, each 1099-R and 945 if needed. Very time intensive obviously. We are struggling with residual balances that come in once someone's account has been closed. We provide the fee disclosure each year as participants pay the $125. We had a policy of reducing our fee so as to be no more than 10% of the distribution - didn't want any DOL attention. So I'm ready to write off balances less than our fee. I guess those funds would go into an unallocated suspense account. Curious what others do.

I advised in this situation to charge less - the actual hourly time and create goodwill with their new client. Still made money and have a good relationship to start off with. Some things such as few more dollars and possible related aggravation just aren't worth it.

Ok - sounds like no. and yes I'm signed up for 2 hours on Dec 8.

Fee Example: a TPA quotes $15k to $20K for TPA work for a plan year for a new client, not knowing what the records will look like. The plan sponsor signs an engagement letter agreeing to the fee range. Time tracked to complete the year ends up being $12,000. Is it ethical for the TPA to bill $15,000? Can a client demand to see time entries? I think we all know recording exact time doesn't happen. Many small things go un-logged into time/billing. This would be a case where the TPA fee is paid by the plan sponsor not from plan assets.

I just heard from the partners of a plan sponsor that they could barely fund the 3% for 2022 and want to eliminate the 3% safe harbor for 2022. It is not a "maybe" safe harbor. Most of our SH plans have the 3% hard-coded in because it is easier to deal with as opposed to an amendment each year. they are probably stuck for 2022 which is fine. they then will ask me if they have to fund for themselves - 2 partners in a partnership. My answer has always been for this situation yes so as to follow the plan document but if they want to take that chance and simply have insufficient funds, they must at least fund for the non-HCEs. Any way to get out of the safe harbor for 2022 at this late date? Tom

Plan sponsor has an employee who wants to be excluded from the plan due to religious reasons. Eligible employees receive the 3% SH and a small PS. It is not workable to exclude him by job definition or class, location, etc. Very strange and I will tell the sponsor he must participate. Maybe use the beneficiary designation to assuage his objection to the plan whatever that might be.

We are taking over a plan that has an insurance company document. The document indicates spousal consent is not required for distributions (unless the plan includes a source that requires such - and there is no such source in the plan.) The plan offers 5 annuity options as alternative forms of benefit. We never have those in plans and I'd like to eliminate these with our restatement effective 1/1/2023. It's been awhile since I looked at this. Upon some quick research it appears that yes these can be eliminated prospectively with a 90-day advance notice and provided the plan has the lump sum option. I like to get the opinion of this group which is very trustworthy - more so than my own "research." Thank you, Tom

Thank you pmacduff. we will try that. One person (my more technical remote person) was able to get in. She's coming in tomorrow to help a couple of us more non-technical. If we can fix the log in that's 90% of the battle, then we need to get our Crystal Custom reports in. I'm confident it will work out soon.

I've not used this group before and see it could be helpful, if for nothing else to vent. But I appreciate helpful comments and I know there are many knowledgeable people in here. I enjoyed reading the history of some in here. We went with Pentabs in 1991, then Quantech, then Relius in-house, and then Relius ASP in May 2020. It was an adjustment but overall went well each time. And I realize we are only 2 days into this new migration but we are all locked out of being able to log into Relius Admin. Work accumulates rather quickly and so we hope for resolution soon. There were multiple emails with instructions, pdfs, etc. More than I wanted to deal with. I called FIS this morning and was on hold for perhaps a half hour. Someone did finally pick up - tells me maybe we aren't the only ones with this issue. So I'm waiting for a callback and hope for resolution. We had trouble with the portal when that came out. I finally got that to work but haven't logged on in months and can almost guarantee I will be blocked from logging in. Any comments about your experience with this new migration? I know we'll get there but it is frustrating. Tom

Client restated for Cycle 3 in 2022 and after much discussion decided on the Flexible Discretionary Match primarily because they wanted 2 different match allocation groups. They are matching 100% of 2.5% for NHCEs and 100% of 1% for HCEs on a pay period basis. My understanding is the first notice is required for the 2023 plan year and within 60 days of making the final match contribution so likely in March 2024. First question - is the allocation groups they chose - HCE and NHCE, not job related necessarily. We can change that to define positions that are HCE if we have to such as CEO, COO, CFO, HR Director, etc. Do you think HCE and NHCE is ok? There are no working owners and so it is just prior year comp based. Secondly - under flexible match, must the match allocation groups be mentioned in the plan adoption agreement? Or can that be left unmentioned since this is a discretionary match and the notice isn't due until after the end of the year? This is the only flexible discretionary match client we have - fortunately. Thank you Tom

When oh when will the 5558 be electronically filed? Should be an easy project for IRS especially when 87,000 new employees get hired.

Plan documents appear to say that a default IRA rollover cannot be done for those who severed employment, attained the later of 62/NRA and have balance <$5,000. So if they don't respond to the distribution process, they get a cash-out less withholding and are not to be rolled to a default IRA. This seems to be something I had not noticed. I doubt we've had a case since retirees are diligent about getting their funds rolled out Am I right about this?

Good points - I forgot all about the old cash or deferred rule. Thanks

Great input Peter. That probably makes this next question moot. The client is asking fi they can give each person the option - wages of plan contribution. Any final comments on that aspect? Thank you!

A client asked about making prevailing wage contributions to a 401(k) instead of paying wages. It makes sense to save the FICA tax. So there is no eligibility requirement, no allocation conditions, 100% vested and can be used to offset the employer profit sharing allocation if there is one. I assume it can be included in nondiscrimination testing since it can offset PS. Of course this feature must be added in the Adoption Agreement. My question is what else has to be done? The client is already calculating the amount and paying as wages. Does this change need to be in the service contract they are serving, the affected employees notified it will no longer be in wages? Or can our client just make this change? I told the client to check with their legal counsel and/or tax advisor. As far as us as TPA - it's pretty easy. Tom

And HCEs get the 3% Non-Elective Safe HArbor not just NHCEs assuming the plan has not excluded the HCEs which sometimes it does with class-allocated plans (allows owner family members for example to be excluded from an employer contribution to help with testing.)

Thank you CB. I had just received one and thought I'd check if the rules changed on this. Thanks - I have to time get the client to hand sign, not much time, but enough.